Troy-based Syntel to be acquired for $3.4 billion

Deal will give French computer-services company access to large U.S. financial customers

Bulk of Syntel's 23,000-person workforce is in India

Bharat Desai

Atos SE agreed to buy Syntel Inc. for about $3.4 billion in a cash deal that would give the French computer-services company access to large U.S. financial customers including American Express Co. and State Street Corp.

Bezons, France-based Atos will pay $41 a share for the U.S. information technology firm, the companies said in a joint statement Sunday. The per-share figure is 4.8 percent more than Troy-based Syntel's closing price of $39.13 on July 20. The total price is $3.57 billion including Syntel debt, the companies said.

Atos has been seeking to expand in the U.S., among other acquisition priorities, CFO Elie Girard said in late April during a call with journalists following the release of first-quarter earnings. While Syntel gets most of its revenue from the U.S., the bulk of its 23,000-person workforce is in India.

Syntel's co-chairman and founder, Bharat Desai, is a Kenya native who immigrated to Detroit from India in 1976 on what was supposed to be a six-month assignment, eventually getting his MBA and becoming a U.S. citizen in 1985.

Desai started Syntel with his wife, Neerja Sethi, in 1980. The company ranked 27th on Crain's list of largest publicly traded companies in Southeast Michigan for 2017 with revenue of $924 million.

In the late 1980s, the company was an early entrant into the trend of outsourcing information-technology work to India, taking advantage of lower labor costs and an educated workforce in the country.

The purchase will be "transformational" for Atos's Business & Platform Solutions Division, Chairman and CEO Thierry Breton said in the statement. Syntel will enhance Atos's profile "through an extended digital services offering, cutting-edge India-based delivery platforms, as well as revenue and cost synergies."

The deal will "significantly enhance our presence in North America and accelerate the digital transformation of Atos's customers worldwide," Breton said.

While Atos's market capitalization of $15.4 billion is almost five times that of Syntel, the American company's shares have been growing faster. Syntel shares have doubled in the past year, while Atos is little changed.

Syntel's top three customers — American Express, State Street Bank and FedEx Corp. — accounted for 45 percent of its revenue last year, according to an annual report. Its top 10 customers made up 74 percent of revenue, and only about 11 percent of sales came from outside of North America.

Syntel's net revenue has dropped for the past two years, including a 4.4 percent decline to $923.8 million in 2017. The company has global development centers in India, Scotland, Poland and the Philippines, with 76 percent of its billable workforce located in India, according to Syntel's annual report.

Atos said it expects the deal to close by year-end, adding to earnings immediately and providing "double-digit accretion as early as 2019" excluding transaction costs and goodwill. The boards of both companies approved the transaction on July 20 and Syntel shareholders holding 51 percent of the stock, including founders, pledged to vote in favor, according to a statement.

The transaction will be financed with debt underwritten by BNP Paribas SA and JP Morgan Chase & Co.

Goldman Sachs & Co. LLC is acting as financial adviser to Syntel and Sullivan & Cromwell LLP is acting as its legal counsel. Jones Day is legal counsel to Syntel's founders. Rothschild & Cie, JP Morgan Securities PLC and BNP Paribas Corporate Finance are acting as financial advisers to Atos and Weil, Gotshal and Manges LLP is acting as its legal counsel.